Tribunal cancels penalty on Cenvat Credit due to lack of fraudulent intent

The Tribunal allowed the appeal, setting aside the interest and penalty demands on wrongly availed Cenvat Credit due to the lack of fraudulent intent by the appellants. The immediate reversal of credit, non-utilization, and sufficient account balance indicated compliance and negated penalty imposition. The decision was in line with legal precedents, emphasizing the absence of malafide intent and the appellants' prompt corrective actions.

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Issues Involved:
Whether appellants are liable to pay interest and penalty on wrongly availed Cenvat Credit despite reversal before show cause notice.

Analysis:
The appeal was filed against the Commissioner (Appeals) order confirming the demand for wrongly availed Cenvat Credit of Rs. 94,208 along with interest and penalty. The appellants reversed the credit before the show cause notice was issued, indicating no intention to evade tax. The appellant's counsel argued lack of malafide intent, suppression, or fraud, emphasizing the immediate repayment upon discovery. The Department's representative supported the impugned order. The Tribunal noted the timely reversal by the appellants upon audit team's notification, preceding the show cause notice. The Revenue failed to prove fraud, collusion, willful misstatement, or suppression of facts, necessary for penalty under Section 11AC. The appellants' non-utilization of the credit and the sufficient balance in their Cenvat Account further supported the lack of fraudulent intent. Citing a similar case precedent, the Tribunal ruled in favor of the appellant, setting aside the interest and penalty demands. The decision aligned with the Hon'ble Karnataka High Court's ruling and previous Tribunal orders, emphasizing the lack of malafide intent and the appellants' prompt corrective action. Consequently, the appeal was allowed on 08/08/2018.

Conclusion:
The Tribunal's judgment favored the appellant, emphasizing the absence of fraudulent intent in the wrongful Cenvat Credit availing case. The immediate credit reversal, lack of utilization, and sufficient account balance demonstrated compliance and negated penalty imposition. The decision aligned with legal precedents and established principles, setting aside the interest and penalty demands based on the lack of malafide intent and the appellants' proactive corrective measures.

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